Moving to Canada and buying a house there are attainable goals for all who would like to change their country of living. Still, with the recent rises in property prices across this beautiful country, many immigrants are left to wonder whether this is a realistic goal and whether maybe renting for your whole life could cost you less in total. The answer is no.

In fact, as the property prices in Canada rise, so do the rents. The thing is that, in the post-pandemic era, many properties were sold and purchased. The new owners usually had business plans with their new properties. A similar trend can be observed in the US, where an influx of new investors made the prices and rents skyrocket. What is left in the aftermath is a property market with prices too high for many to afford.

The story continues with an increase in the number of homeless people and a market where it is difficult to recuperate the costs, let alone make profits. This being said, Canada is a much more stable property market than the US, and the prices were much slower to rise. This has provided many prospective homeowners with enough time and a chance to get accustomed to the new prices.

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Understanding Canadian Real Estate Market Dynamics

Considering the increase in both prices of new and old properties and the rise in the rental prices across the country, it is now more important than ever to understand what it takes to purchase a new home and how it can pay off, in the long run, over renting. The thing is that many younger couples simply cannot afford a place of their own, but some smarter peers of theirs can offer many valuable insights into what it takes to own a home.

While many Canadians worry that their existing loans may be impeding their ability to purchase a home in Canada, many newcomers to the country, Canadian permanent residents, and Canadian citizens worry about whether they can own a place legally. On top of this, the situation is further complicated by the fact that there are regional differences in both property prices and the legal aspect of owning a home in Canada, so let’s have a look at it and solve this mystery.

Who Can Buy a House in Canada?

Anyone can buy a house in Canada. If you are a resident or a citizen, you have the option to purchase your property with a 5-20% interest rate. On the other hand, if you are a non-resident, you can still purchase your home in Canada but will need around ⅓ of the home value as the downpayment or 35% to be exact.

There may be some limitations though to whether you can purchase your home or not despite you having a legal status. People with very low credit scores, such as those just starting in Canada may have difficulties getting their mortgage or may get one with very high interest rates. On the other hand, if you have declared bankruptcy or have otherwise failed on multiple mortgage payments, you will also need to rethink whether purchasing a home is the right solution for you. Not that it is illegal to purchase one, but you may have to secure all the funds by yourself, as no bank will be willing to issue a mortgage to your name.

Besides this, everyone who can afford a place in Canada can feel free to buy one. However, one thing that many people forget to think about is how much you will be paying in taxes each year, on top of your mortgage payments. When it comes to these costs, you will have to consider them again and make sure that you can cover both the costs of the taxes and the installations for your home/vehicle and any other expenses you may have. Taxes are also a part of being/not being able to afford a place.

Take A Look At Canada Bans Foreigners from Buying Residential Property:

Regional Variations in Property Prices

When seeking a home, you will need to understand that Canada does not have a uniform housing market. This means that housing prices, for both purchase and renting, differ highly based on the province/territory that you would like to purchase your piece of real estate. When it comes to the variations within provinces themselves, there are also high variations depending on the geography of the region, how developed the area is, the vicinity of cultural and public goods and services, and the vicinity of larger cities.

This being said properties in smaller areas, rural areas, less developed areas, and similar are usually priced much lower. They are followed by areas that are adjunct to larger cities in Canada, well-developed areas and provinces, and those that offer good public infrastructure. The closer you get to the city centre, the more expensive it gets, with scenic suburbs or pristine nature areas being the most expensive to live in.

Impact of Immigration on Housing Demand

A big thing to consider when thinking of the Canadian housing market is how massive immigration impacts the housing demand and housing prices. As Canada is receiving well over half a million immigrants into its borders every year, there is a lot of demand for new properties. And although Canadian residents and citizens are likely to have fewer babies than their parents and grandparents did, the Canadian population is still growing. Needless to say, this creates extra pressure on the housing market.

This is a part of the reason why the prices of housing in Canada have skyrocketed in recent years. However, immigration is not to be blamed: rather it is the increased demand. While some areas are building up, it is important to note that many people are moving to larger cities for the sheer need of work, and this is boosting the housing prices as well. This is why a trend can be seen where the houses and apartments in cities in Canada cost more and more, while some more rural areas have been experiencing a much slower increase in housing prices.

Steps to Buying a House For the First-Time in Canada

In reality, purchasing a home in Canada is no different from purchasing a home in any other country in the world. Sure, the market will be different and a more developed country may mean that there are more legal steps to owning a home than in your home country. Still, this is an endeavour that is well worth the stress and the time invested, as there is no feeling such as owning a place of your own. In fact, let’s cover all the steps to buying a home in Canada:

  • Optimize your down payment
  • Select the best location
  • Collect necessary documents
  • Get mortgage pre-approved
  • Locate a good and trusted realtor
  • Start searching for your new home
  • Get final mortgage approval
  • Select a lawyer to assist you during the entire process
  • Invest in fire insurance and other forms of insurance that the location might dictate
  • Move-in

Spend Less on a Down Payment

One of the biggest barriers to purchasing a home in Canada is not having enough funds for the downpayment. When it comes to the down payment itself, in Canada, it is set to 20%. This may not seem like much, but considering that this is CAD80,000 for a CAD400,000 home, it may seem a bit too much. In fact, it would take years to collect this money, and during this time, the prices of the properties on the Canadian property market would have increased by a certain percentage.

Although this may not be the best time to purchase a new home in Canada, considering that the Canadian immigration authorities do not plan on halting any immigration during this time, it is expected that the demand for homes in Canada will keep rising. And with an increase in demand, there will also be an increase in the prices of homes and apartments in the country. One way to counteract this is to get a CMHC-insured mortgage and pay only 5% of the downpayment. An additional benefit of this is that, despite these mortgages being more expensive, the total cost of the property may have increased more than the extra you had to pay out, and you have secured the current price for the property in the long run.

Please bear in mind that it will be easier to purchase a home in Canada if you are a resident or a citizen than if you are not. On top of the legal complications, you will also need to prepare a much higher down payment as a non-resident. Currently, your downpayment if you are a non-resident will be 35% of the selling price/asking price.

Select the Best Location

Considering that it will still take time to accumulate money for the downpayment, you will need to use this time to carefully choose the best location for your future home. Make sure you take multiple locations into consideration. Go and have a walk in the neighborhoods where you think you could feel good enough living there. Are there good schools, public parks, parking lots, shopping malls, or any other commodities you find essential nearby? Can you afford to live there? Can you find a better place for the same price?

Collect All Necessary Documents

During the process of purchasing your home, you will also need to collect a lot of documents, and it is wise to start doing so beforehand. After all, already in the next step, getting the mortgage pre-approval, you will need some of them. You will need to present income documents to the bank. This may include a paystub, year-end document, the T4 slip, or the NOA (Notice of Assessment). Bank statements may also be required if you are receiving a pension/are retired.

Besides this, you will also need to have proof of having enough funds for the downpayment. Remember that your bank may ask for similar documents, as they need to make sure that you will be able to pay the mortgage back. This may include a simple bank statement, or a few of them – if the bank wants to make sure that you have sufficient funds and that they have been in your bank account for a reasonable amount of time. If the amount has been changing over the period of several months, no worries, especially if you had major purchases, but have managed to recover the amount or if the amount has been increasing.

Get a Mortgage Pre-approval

Once you have collected enough money for the downpayment, it is time to look for mortgage pre-approval. This will give you a very specific and accurate idea of what money you have at your disposal for the purchase. When it comes to the location and the exact home that you would like to buy, we always recommend you go with several options, as the mortgage that gets preapproved may be a bit lower than what you hoped for. Having several properties on your mind can help you overcome any difficulties or have to take out a second loan for your desired property.

Locate a Realtor

Finding a good realtor may be a bit of a difficult task. In any case, you will need to interview a few of them, see how much they charge, and what their rapport with their client is. It does not hurt to check them out online before making any kind of commitment or even interviewing them. When it comes to finding one, you can also ask your Canadian friends or anybody who has actually found a place of their own. They will usually be more than willing to help you out and connect you with their realtor.

Start Your House Search

Finding the home you like is the next logical step. Of course, you may already have something on your mind as you’ve been going over possible locations for your dream home. In doing so, you can contact your realtor, especially if they are local to the area, some property agencies, again local to the area, or you can simply search online. Never forget to check out dozens of places if need be before boiling it down to a few that are according to your taste.

When it comes to choosing the home you actually like, think far ahead. Maybe right now you are not planning a family, but within 5 years that could change. It is much easier to have a spare room than to switch houses and go through this entire process all over again with a toddler running after you. You will need to be critical about the homes you are browsing and you will also need to be aware of what your current needs are and the future needs will be.

Obtain Final Approval for a Mortgage

Once you know the home that you would like to spend the rest of your life in, it is time to contact the vendor or the agency selling it on their behalf. You will need to do the home inspection, to make sure that everything is correct and you will need to speak with the vendor about bills, any damage that the house has suffered, as well as the reparations that were in place. Whether the home comes furnished or not is also a big question to ask during this talk. The same should be done about the larger appliances.

When it comes to the final approval for the mortgage, this talk and the negotiation of the price will be necessary. When it comes to the mortgage itself, you will need to have the exact cost of the home before you start the negotiations with the bank or the mortgage house. You will need to sign a mortgage lending agreement if everything is OK. Your bank may ask you for a home appraisal, which is something that you will have to pay on your own.

Select a Lawyer

Finding a good lawyer to run over the contracts with you and be available during the home purchase process is another good idea. This way, you will have a pair of well-trained eyes on the contract and the papers that you are dealing with and you will make sure that everything is done 100% legally. When it comes to finding and hiring a lawyer, your friends, family, etc. can help you during the process. Lawyers will also cost you a bit, so it may be a good idea to actually consider this as a part of the total expenses.

Invest in Fire Insurance

Once you have your lawyer, you will also need a fire insurance or a home insurance. When it comes to this, you will need to have your home insurance even before you get your final mortgage approval, as this is a necessary step to ensuring you get the mortgage in the first place. No bank will issue a mortgage to a home that has not been insured.

Moving-in Day

If all goes well, and the mortgage is released, you will be moving in soon. Make sure you also negotiate/check in with the utility companies: moving into a house that has no electricity or water connections is not a pleasant thing to do. Make sure all the contracts are switched to your name, and make sure to change your residence once settled in. When it comes to the utilities that you will need access to, make sure to contact the gas company, energy provider, local utility company, water company, and the municipality for trash collection. This is a good way to ensure you are all set. Some homes may also have an active and running telephone connection, as well as cable and internet connections. You will need to switch all of these to your name.

Check Out This First Time Home Buyer Guide if You are Buying a House in Canada:

What To Consider When Buying a House in Canada

Even before undertaking all the above steps to ensure that you have a Canadian roof over your head, there are several things that you should consider. We recommend that you take your time with this, as this is the biggest purchase you will ever make, and will need to ensure that you know what you are doing. You will need to consider saving up for the downpayment, closing costs on your mortgage, your employment history, as well as the location of your future property.

The Down Payment

The downpayment, as has been mentioned before is one of the biggest headaches for a prospective homeowner. The downpayment can be anywhere from 5% to 20% of the total value of the home or apartment that you intend to buy. As this is not a low amount of money, even with the lower-priced properties, it may take years to save up for a downpayment. With this in mind:

  • Have a good look at your budget
  • If you do not have a budget already make one
  • Include ALL your income
  • Include ALL your expenses
  • Cut back as much as you can, you do not really need cable and subscriptions to five different services each month
  • Start planning your meals, bulk-buying, and using coupons and discounts whenever you can
  • Pay off the minimum payments on all your debts and then contribute any remaining money at the end of the month to the debt with the highest interest rate
  • Once all your debts have been paid off, start saving for the downpayment
  • Pick up a second job, or a few shifts extra at your workplace
  • If you cannot have a second job, you may want to consider Uber, UberEats, or a similar service where you could work for a limited time a week, and only when you are free
  • Cut back on luxuries and clothing/going out
  • Put all your money in a savings account so that you can earn some interest while saving up

Closing Costs for Mortgages

Another cost that is commonly overlooked when purchasing a home is the closing cost of the mortgage. These costs amount to up to 3% (sometimes more) of the total asking price for the home you are buying. These costs include but are not limited to, the costs associated with home inspection, home appraisal, and title insurance. All of these are a must, and we recommend you go through them before establishing how much money you will need for the home. Saving on a roof inspection, for example, will save you some money, but may cost you over CAD10,000 to fix the damage that a leaky roof (but still seemingly healthy) may cause you in the long run.

Employment

Another thing to consider is your employment. The downpayment money is a necessity, and without it, you will not be able to purchase a home, but so is your employment. When it comes to your employment, you will need to prove that you have:

  • A stable job
  • A stable income
  • Enough cash flow to pay all installments of the loan
  • Enough cash flow remaining to cover your basic life expenses
  • A credit score good enough so that your interest rates stay low enough and so that you can save money in the long run with your purchase

Always remember that this is a big step in someone’s life and that you will need to consider each and every step carefully to make sure you do not overpay and leave yourself without enough cash flow for your basic expenses. What good is a 300-square-meter home if you cannot afford a vacation for the duration of your mortgage?

Locating the Proper Location

Needless to say, the best or the proper location will also be a big factor to consider. A more attractive location will significantly increase the quality of your life, but a more remote location, with fewer amenities to offer, will cost you less. In the end, it all depends on what your needs are and what you can afford at the moment when taking out a mortgage. Here are some factors to consider when choosing your ideal location for a home in Canada:

  • The vicinity of public services such as bus stops, clinics, subway, post offices, railway stations, and airports
  • The vicinity of cultural avenues and events
  • The vicinity of the city centre
  • The ease of access to major collector roads and the ease of access to freeways if you travel often
  • The vicinity of kindergartens and schools if you have children or would like to start a family before the mortgage ends
  • The ability to expand the property
  • The area of land that the property is on, if you are looking for a house
  • The vicinity of your workplace
  • The vicinity of friends and family, if you would like to have and pay regular visits

Navigating Canadian Property Listings

Once you have an idea of what kind of property you would like, and what size of property would do for you and your family, it is time to consider actually looking for one. Far from a drive around your preferred area, looking for a place in Canada is done mostly online. You can search for your dream home using online platforms or real estate agents. Of course, you can also ask friends and family for help, as you will need information on as many properties as you can get your hands on.

Online Platforms vs. Real Estate Agents

If you want to search for a place online, there is the realtor.ca website, which is one of the biggest ones of its kind in Canada. This will give you a good starting point, as you will be able to look at the different properties and filter the offer by size, area, as well as amenities available in the home itself. This is always our recommendation, as online search goes well with your time and you can do it on the go.

On the other hand, some simply prefer to contact local real estate agents and start their search there. When it comes to real estate agents, being able to talk with someone is a big plus, even more so as the person can understand the details that you may have difficulties explaining to a filter on your computer. The biggest downside is that they cost money and time and that you will often have to bend towards their schedule.

Decoding Property Descriptions and Terminologies

Besides the purchase price and the size of the home, there are more things to consider. Take your description and use the following lingo to decode what the house contains and estimate whether this is what you are looking for:

Decoding-property-descriptions-and-terminologies-canada-pdfDownload

Where in Canada Do You Wish To Call Home?

When thinking about moving to Canada, many people first think of big and bustling cities and their busy city centres. However, this may not always be the best scenario, especially considering the housing prices there. Still, many young people or those whose workplaces are relatively close or in the urban cores of cities may appreciate the time saved and cultural and social opportunities that big cities like Toronto or Vancouver have to offer.

And while younger people and professionals, as well as students, may be inclined to live and work in bigger cities, once the PR status is there (the Permanent Resident status), they usually start thinking otherwise. Wanting a bigger place with a garden, an extra bedroom to have for the family when they come to visit, and having a suburban upbringing for your children is much better than being crammed in a small apartment. For this reason, many move outside of cities or very close by once their studies are over or their professional life allows them to do so.

There is another reason for this and that is long-term thinking. When it comes to this, it is already the areas around big cities that offer a chance to save in the long run while still enjoying everything that a big city has to offer. Lower costs of housing (CAD350,000 is the Canadian average without Vancouver and Toronto only; counting those in raises the price to over CAD450,000), lower cost of living, cheaper food, and utilities, as well as less stress, noise, and pollution are all the reasons you may want to choose a place other than a busy city centre to live in.

What Kind of Property Do You Intend to Purchase in Canada?

However, there is a clear trend that newcomers to Canada choose bigger cities to settle in. More opportunities for work, more social and cultural interaction, and more to see and enjoy are simply too difficult to pass by for many. However, once you have experienced living in a smaller place, the chances of you returning to a big city are slim at best. This being said, let’s have a look at the types of property that you may choose in Canada to settle in:

  • Condominium
  • Single home
  • Semi-detached home
  • Townhouse
  • Duplex or triplex

Condominium

A condominium is often called a flat (US English) or an apartment (British English). It is a single unit within a larger building where you do not purchase the entire building or the land it stands on, but rather a single unit for your own use. Condos are usually much smaller than houses and cost a lot more per square meter. However, the smaller size makes them very affordable, and the utility bills are much lower.

Single

A single home or a detached home is a single building that shares no walls with buildings on adjacent properties. It is a very popular housing option in Canada despite being the priceiest. When you purchase a single, a detached, or a house (put simply), you own both the home and the land under it. You pay taxes and are legally responsible for everything taking place on your property.

Semi-Detached

A semi-detached home is a single building that shares a single wall with the neighbouring home. You will often see these in Canadian suburbs and closer to the urban cores of the cities. This form of housing emerged out of a need to get the most out of the outdoor space (which is often very limited) and to save on construction materials and insulation (as one wall is shared with the adjacent home). They are very popular in Canada.

Townhouse

To save space in bigger cities and get as much value out of land as possible, townhouses arose as the next (very popular) housing option. When it comes to this type of housing, it is necessary to understand that you still own both the building and the land underneath. The building itself is attached to other buildings on both sides, and, if there is a backyard, you will need to go through the house to reach it.

Duplex or Triplex

A duplex or a triplex are large homes that have been subdivided into several separate units that can each be rented out. Some families use this approach to housing as it helps offset the cost of the entire building. Many use it for a while, until they pay off the place, while others use it as a form of income and for longer periods.

FAQs

Are There New Rules for Buying a House in Canada?

Yes, there are. As of January 1st, 2023, foreigners cannot purchase homes and property in Canada. The Act specifically names ‘non-Canadians’ as those unable to obtain property in this country. Canadian citizens and permanent residents can do so, just as they could until now. The act will last for two years and end on January 1st, 2025, unless prolonged.

What Are Some Places in Canada to Live and Buy a House for A Cheap Price?

There are many places where you can find affordable housing in Canada. Here are a few of them, and bear in mind that the lower property prices sometimes come with higher total taxes:

  1. New Brunswick
  2. Newfoundland and Labrador
  3. Manitoba
  4. Saskatchewan

Please bear in mind that the homes in these provinces cost less than CAD400,000 on average.

How Much Mortgage Can I Get with $40 000 Salary?

There are many factors to consider when looking for a place with a CAD40,000-a-year salary. First of all, our number comes with no other loans on your credit report. This being said the mortgage you can get with CAD40,000 a year is around CAD100,000 to CAD160,000.

Who Cannot Buy a Home in Canada?

As of January 1st, 2023, non-residents and non-citizens of Canada cannot purchase a home in Canada. The same goes for temporary residents. This leaves us with permanent residents and citizens that Canadian banks and mortgage specialists will consider assisting in the buying process. Irrelevant of your financial status and whether you need a mortgage or not, you cannot purchase a home in Canada unless a permanent resident or a citizen.

How Much Money Should I Save Before Buying a House in Canada?

How much money you should save before buying a house in Canada depends on whether you will be taking out insurance on your mortgage or not. Insured mortgages ask for proof of a source of income and 5% as the downpayment. Uninsured mortgages issued by mortgage lenders in Canada should have 20% for the downpayment. Until 2023, foreigners could purchase homes in Canada, but the financial requirements said they needed 35% as the downpayment. Financial institutions cannot work with foreigners anymore, as the new act says that foreigners cannot purchase a home in Canada. They have to use immigration options and programs for newcomers to ensure they get to enjoy Canadian property.

Can I Get Permanent Residency if I Buy Any Property in Canada?

No, you cannot purchase a home to get permanent residency. The legal requirement for the Canadian PR is that you choose an immigration program, get the PR – Permanent Residence, and only then can you purchase a home in Canada. Potential issues have to be resolved on the way, and we recommend getting mortgage insurance, as well as working on your Canadian credit history to ensure lower interest rates. Still, irrelevant of the type of insurance on your mortgage, how high or low the purchase price was, and how diligently you pay property taxes, you cannot invest in a home in Canada and get the Canadian PR.

Conclusion

Purchasing a home in Canada is a great way to secure your and your family’s security and a roof over your heads. However, this is a journey that is not easy, takes time and a lot of funds, and is (voted) one of the most stressful experiences in your life. When it comes to the home itself, you may have noticed that there are different types of housing in Canada and that each of them comes with its pros and cons. For all these reasons, refer to our guide and take your time to choose the location, the realtor, the home type, and finally the home that you wish to live in.